FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Samtech Manufacturing purchased land and a building for $4 million. In addition to the purchase price, Samtech made the following
expenditures in connection with the purchase of the land and building:
Title insurance.
Legal fees for drawing the contract
Pro-rated property taxes for the period after acquisition
State transfer fees
$ 25,000
9,500
45,000
4,900
An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3 and $2 million, respectively.
Shortly after acquisition, Samtech spent $91,000 to construct a parking lot and $49,000 for landscaping.
Required:
1. Determine the initial valuation of each asset Samtech acquired in these transactions.
2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building.
Demolition costs were $340,000 and the salvaged materials were sold for $5,500. In addition, Samtech spent $88,000 clearing
and grading the land in preparation for the construction of a new building.
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Transcribed Image Text:Samtech Manufacturing purchased land and a building for $4 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building: Title insurance. Legal fees for drawing the contract Pro-rated property taxes for the period after acquisition State transfer fees $ 25,000 9,500 45,000 4,900 An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3 and $2 million, respectively. Shortly after acquisition, Samtech spent $91,000 to construct a parking lot and $49,000 for landscaping. Required: 1. Determine the initial valuation of each asset Samtech acquired in these transactions. 2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $340,000 and the salvaged materials were sold for $5,500. In addition, Samtech spent $88,000 clearing and grading the land in preparation for the construction of a new building.
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